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Selecting Stocks for Long-Term Investment. Working with Finviz. Part 6

12 February 2025

Selecting Stocks for Long-Term Investment. Working with Finviz. Part 6

This is the sixth article in the "Stock Selection on Finviz" series. It describes the tools that can be used when searching for and analyzing stocks for long-term investment.

Previous articles:

  • How to Select Stocks for Trading: Working with Finviz. Part 1;
  • How to Select Stocks on Finviz: Fundamental Parameters. Part 2;
  • Stock Selection: Technical Analysis Parameters in the Finviz Screener. Part 3;
  • How to Find Stocks for Intraday Trading. Working with Finviz Filters. Part 4;
  • How to Find Stocks for Pump and Dump Trading. Working with Finviz Filters. Part 5.

One of the main goals for a long-term investor should be achieving returns that exceed those of the S&P 500 index. Additionally, the return curve should have less volatility than the growth curve of the S&P 500 index. If this goal is met, it means the investor is effectively managing their capital: it is more profitable for them to stick to their strategy than to invest in the S&P 500.

There are many different approaches and methods for finding assets for investment. In this article, we will explore one of the most popular: searching for stocks of profitable companies that have the potential for continued sustainable growth. We will also show how to select promising companies that are likely to attract the attention of other investors. The following filters are suitable for this purpose:

From the Descriptive tab:

  • Analyst recom. — select hold or better, because positive analyst recommendations mean that the stock is considered promising by professionals and has potential for growth.

From the Fundamental tab:

  • P/E — select Under 30. The screener will filter out stocks with a P/E ratio higher than 30.
  • Price/Free Cash Flow — select Under 30. The screener will select stocks that generate a profit greater than 3% of the market capitalization in a year.
  • EPS growth this year — select Positive (>0%), as it’s important for the company’s earnings to have grown over the past year. This indicates good financial health.
  • EPS growth next year — select Positive (>0%), since it’s important that the company’s expected earnings next year are higher than they are currently. This indicates good financial prospects.
  • EPS growth past 5 years — select Positive (>0%), as it’s important for the company’s earnings to have grown over the past five years. This suggests sustainable financial stability.
  • EPS growth next 5 years — select Positive (>0%), as it’s important for the company’s expected earnings over the next five years to be higher than they are now. This indicates strong financial prospects.
  • Sales growth past 5 years — select Positive (>0%), as it’s important for the company’s sales to have grown over the last five years. This suggests a strong market position.
  • Return on equity — select Over +10%, as the screener will select stocks where the return on equity is greater than 10% annually.
  • LT Debt/Equity — select Under 1, as the screener will select stocks where the long-term debt does not exceed the company’s equity.

From the Technical tab:

  • 20-Day Simple Moving Average — select Price above 20 SMA, as stocks whose price is above the short-term average have mostly been bought in the last 20 days. This indicates that investors have likely shown interest in the stock and have been buying it more frequently than selling it.
  • 50-Day Simple Moving Average — select Price above 50 SMA, as stocks whose price is above the medium-term average have mostly been bought in the last 50 days. This indicates that investors have likely shown interest in the stock and have been buying it more frequently than selling it.
  • 200-Day Simple Moving Average — select Price above 200 SMA, as stocks whose price is above the long-term average have mostly been bought in the last 200 days. This indicates that investors have likely shown interest in the stock and have been buying it more frequently than selling it.

As a result, from over 7,000 stocks available for analysis, fewer than 100 promising stocks will remain, which can be used to build a portfolio for long-term investment.

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